Walking away from homes
Sponsored by: MNAR
As the economy tightens, even main stream media sources like the Wall Street Journal are giving consumers a pass on mortgage defaults.
Although not condoning the behavior, the logic and lure of getting out from underneath a upside down mortgage will be even more tempting as the jobless rate remains high for the next year or more.
Worst of all, this means a larger REO inventory -- homes owned by lenders after foreclosure -- and a slower than hoped for housing/building recovery. Longer term it may mean a further tightening on mortgage qualifications and the inclusion of “recourse” loans, a situation where lenders have an ability to tap an individual’s other assets – IRA, 401K, autos, boats, college funds, etc. – when they default on a mortgage.
This will require a legislative change, but it is a possibility if investors remain skittish about investing in mortgages.
Brett Arends provides more insight homeowners under water in his article "When It's OK to Walk Away From Your Home" in the Wall Street Journal.
